Best auto loan rates of 2020

Smiling woman looking at tablet while leaning on a car Image: Smiling woman looking at tablet while leaning on a car

In a Nutshell

The best auto loan rates are typically reserved for people with stellar credit — but some lenders may be better than others, depending on the type of loan you need. Many of these lenders offer low interest rates (including discounts), flexible repayment terms and more.

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If you’re hoping to qualify for the best auto loan rates, having excellent credit is a good start.

But even if your credit isn’t perfect, some lenders offer interest rate discounts and other features that may make them a good fit for you. Here’s a roundup of lenders offering some of the best starting loan rates (as of April 29, 2020) and other potential benefits for different auto loan types.



Best for new-car loans: Bank of America and PenFed Credit Union

Loans for new cars typically have lower interest rates than used-car loans, so you may already be on track to score a better auto loan rate. Among all of the lenders we reviewed, Bank of America and PenFed Credit Union are our top choices.

Bank of America

Why Bank of America stands out: If you’re a Preferred Rewards customer with the bank, you can qualify for an interest rate that’s up to 0.5% lower than the low starting annual percentage rate, or APR, of 2.69% that the bank already offers.

To qualify as a Preferred Rewards client, you must have three-month average combined balances of at least $20,000 in qualifying accounts with Bank of America and Merrill Lynch. But to be eligible for the greatest discount, you’ll have to be part of a highest tier preferred rewards category, which has higher qualifying account balances.

Here’s some more info about Bank of America auto loans.

  • You can purchase a vehicle only from franchise dealerships and select independent dealers.
  • Repayment terms range from 12 to 75 months. You may see different terms if you apply through Credit Karma.
  • If your application is approved, your rate is locked in for 30 days.

Read our full review of Bank of America auto loans.

PenFed Credit Union

Why PenFed Credit Union stands out: PenFed offers auto loan rates as low as 1.14% if you purchase a new vehicle through its car-buying service — 2.14% if you don’t. It also allows you to finance up to 110% of the purchase price of the vehicle. That feature can come in handy if you’re low on cash and want to buy some add-ons like a maintenance contract or GAP insurance.

Here are some more details about PenFed Credit Union.

  • You must become a member to apply, though PenFed offers many ways to become eligible, including through your employer, association membership or volunteerism.
  • Loan terms range from 36 to 84 months. Remember that while choosing a longer term could reduce your monthly payment, you could end up paying more in interest over the life of the loan.
  • You must be a member of the credit union for at least 90 days to apply for preapproval.

Read our full review of PenFed Credit Union auto loans.

Best for used-car loans: U.S. Bank and Chase

If you’re buying used, you may not get an auto loan rate that’s as low as if you were buying new. But considering that, according to Carfax, new cars can lose more than 10% of their value within a month of your purchase, a used vehicle may still make better sense financially.

For used-car loans, we like U.S. Bank and Chase. Here’s why.

U.S. Bank

Why U.S. Bank stands out: The bank offers interest rates as low as 3.09% for those who meet a specific set of criteria. The requirements include having excellent credit, buying a car that’s no more than a year old and setting up automatic payments from a U.S. Bank account. You also must have a loan amount of $10,000 or more, a loan term of 36 months or less and a loan-to-value ratio of 80% or less. But even if you don’t meet those conditions, you may still qualify for the same rates as a new-car loan if the car you’re buying is no more than six years old.

Here’s more on U.S. Bank.

  • You need to live in one of the 26 states where U.S. Bank has a branch.
  • Loan terms range from 12 to 72 months.
  • The bank charges a prepayment penalty if you pay off your loan within the first year.

Read our full review of U.S. Bank auto loans.

Chase

Why Chase stands out: While the bank doesn’t list its auto loan rates, you can use its online auto loan calculator to see estimated rates. We were able to see an estimated rate as low as 2.99% APR.

Here are some more details about Chase.

  • You can get an interest rate discount if you’re a Chase Private Client (requires an average daily balance of at least $250,000 in qualifying personal, business and investment accounts).
  • Chase doesn’t require a down payment on auto loans.
  • You must finance a car from a dealer in Chase’s network.

Read our full review of Chase auto loans.

Best for private-party loans: LightStream and PNC

Buying a car from an individual instead of a car dealership has both benefits and drawbacks. It can be cheaper, but not all lenders offer financing for private-party sales.

LightStream and PNC are two banks that offer private-party loans with low starting rates.

LightStream

Why LightStream stands out: LightStream offers rates as low as 4.99% APR on private-party loans if you opt into automatic payments. The bank offers both secured and unsecured loans for a car purchase.

With an unsecured loan, you don’t have to worry about having your car repossessed if you can’t make your payments — though your credit would probably take a big hit. And if another lender approves an unsecured loan at a lower rate, LightStream will offer a rate that’s 0.1 percentage point lower through its Rate Beat program (this program isn’t available for secured auto loans).

Here’s more on LightStream.

  • LightStream doesn’t offer the ability to apply for preapproval.
  • Repayment terms range from 24 to 84 months.

Read our full review of LightStream auto loans.

PNC

Why PNC stands out: Interest rates go as low as 3.24% if you opt into automatic payments from a PNC checking account. This rate is pretty close to the starting new-car loan rates some other lenders offer.

Here’s some more info on PNC.

  • PNC doesn’t appear to finance car models older than 2012.
  • You need to live in a state where PNC does business to apply (enter your ZIP code on the online application to find out if you’re eligible). PNC branches are located in the Mid-Atlantic, Southeast and Midwest regions of the U.S.
  • PNC offers private-party loan terms of 12 to 72 months.

Best for refinance loans: Autopay and Consumers Credit Union

If your credit situation has improved or rates have dropped since you first bought your car, refinancing your auto loan may help you score a lower interest rate. And Autopay and Consumers Credit Union offer some of the best auto loan rates out there.

Autopay

Why Autopay stands out: Through Autopay’s network of lending partners, qualified applicants could get a rate as low as 1.99% — that’s a couple of percentage points lower than some other lenders. And even if you don’t qualify for the lowest rate possible, Autopay will try to help you find the best rate and loan terms for your needs through its national network.

Here’s some more on Autopay.

  • Its minimum loan amount of $2,500 is relatively low compared to some other lenders. (You might see different terms if you apply through Credit Karma.)
  • The financial institutions in Autopay’s network consider people across the credit spectrum. Autopay claims that, on average, 94% of its marketplace customers who apply for financing through Autopay are approved.
  • You can apply for prequalification with Autopay. If you’re prequalified, you’ll be able to see estimated loan terms and rates from lenders within Autopay’s network. Keep in mind that prequalification isn’t a guarantee of loan approval. Your final application can include a hard credit check, and your loan terms may change once you finalize your loan application.
  • You may need to make a down payment, depending on how much you want to borrow and your car’s value.

Read our full review of Autopay auto loans.

Consumers Credit Union

Why Consumers Credit Union stands out: Rates can be as low as 2.69% if you authorize automatic loan payments from a Consumers Credit Union account. And while some credit unions have narrow eligibility requirements for membership, you’ll just need to pay $5 to become a Consumers Credit Union member.

Here’s some more info about Consumers Credit Union.

  • Loan terms range up to 84 months.
  • Anyone can join, but the credit union only has branches in Illinois.
  • If your car’s model year is older than 2014, starting rates can be more than 3 percentage points higher than if you were refinancing a 2014 to 2017 model.

How we picked these lenders

In choosing lenders for this roundup, we looked primarily at their starting loan rates. But we also considered other factors that can be beneficial such as a range of loan term options, interest rate discounts, the ability to apply for prequalification or preapproval, and geographic availability. While some lenders don’t offer auto loans in all 50 states, we still felt they could offer enough value to qualifying applicants to include them on the list.

What to consider with starting auto loan rates

The most important thing to keep in mind as you’re searching for the best auto loan rates is that they’re typically reserved for people with excellent credit. Depending on the credit-scoring model the lender uses, that could mean having a score in the high 700s or even 800s.

Beyond your credit scores, factors including the kind of loan you want, the amount and repayment term could affect whether you qualify for a lender’s lowest interest rates.

Finally, note that as you’re shopping around, you can apply for multiple auto loans in a short period — typically between 14 to 45 days — and all the associated hard credit inquiries might only count as a single hit.